Business Studies Paper 1 Kenya High Post Mock Exams 2020 - Questions and Answers

INSTRUCTIONS TO CANDIDATES
Answer all the questions in spaces provided.

1. State four factors that you would consider before extending credit facilities to a customer. (4 Marks)
   
   1. ...……………………………………………………………………………………………….……
   2. ……………………………………………………………………………………………….…..….…
   3. …………………………………………………………………………………………………………
   4. ………………………………………………………………………………………………………
2. Give four characteristics of human wants. (4 Marks)
   
   1. ...………………………………………………………………………………………………….……
   2. ……………………………………………………………………………………………….…..….…
   3. …………………………………………………………………………………………………………
   4. ………………………………………………………………………………………………………
3. The following information relates to businesses W, X, Y and Z. (4 Marks)
   

   BUSINESS	ASSETS	LIABILITIES	CAPITAL
   W	350,000	b	150,000
   X	a	160,000	240,000
   Y	800,000	450,000	d
   Z	700,000	c	280,000

   Determine the figures represented by a, b, c and d. (4 Marks)
   
   1. ..…………………………………………………………………………………………………..……
   2. ……………………………………………………………………………………………….…..….…
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4. State any four principles that govern the operations of co-operative societies in Kenya. (4 Marks)
   
   1. ...……………………………………………………………………………………………….;;……
   2. ……………………………………………………………………………………………….…..….…
   3. …………………………………………………………………………………………………………
   4. ………………………………………………………………………………………………………
5. Highlight four limitations posed by the use of national income statistics as a way of comparing the living standards of people for different countries. (4 Marks)
   
   1. ....………………………………………………………………………………………………………
   2. ……………………………………………………………………………………………….…..….…
   3. …………………………………………………………………………………………………………
   4. …………………………………………………………………………………………………………
6. State four merits associated with internal borrowing. (4 Marks)
   
   1. ...…………………………………………………………………………………………………………
   2. ……………………………………………………………………………………………….…..….…
   3. …………………………………………………………………………………………………………
   4. …………………………………………………………………………………………………………
7. What four measures would you advice the government of Kenya to apply so as to curb the inflationary tendencies the country is currently experiencing? (4 Marks)
   
   1. ...…………………………………………………………………………………………………..……
   2. ……………………………………………………………………………………………….…..….…
   3. …………………………………………………………………………………………………………
   4. …………………………………………………………………………………………………………
8. State four factors that may influence the price elasticity of demand of a commodity. (4 Marks)
   
   1. ...…………………………………………………………………………………………………..……
   2. ……………………………………………………………………………………………….…..….…
   3. …………………………………………………………………………………………………………
   4. ………………………………………………………………………………………………………
9. State four possible factors that may contribute to a case of an abnormal demand curve. (4 Marks)
   
   1. ...…………………………………………………………………………………………………..……
   2. ……………………………………………………………………………………………….…..….…
   3. …………………………………………………………………………………………………………
   4. ………………………………………………………………………………………………………
10. The data below relates to Kimeu’s business as at 31st Dec 2010. (4 Mark)
    

    	Shs
    Capital as at 1st Jan 2010	100,000
    Additional investment in the year	40,000
    Profit realized in the year	25,000
    Drawings made in the year	45,000
    Determine Kimeu’s capital as at 31st Dec 2010

11. State four features of labour as a factor of production (4 Marks)
    
    1. ..…………………………………………………………………………………………………………
    2. ……………………………………………………………………………………………….…..….…
    3. …………………………………………………………………………………………………………
    4. ………………………………………………………………………………………………………
12. The table below shows descriptions relating to some documents used in home trade. Name the document fitting the description. (4 Marks)
    

    DESCRIPTION	DOCUMENT
    Used to correct an undercharge error Seeking information on items stocked and their prices Inform the buyer that the goods ordered have been dispatched Requests payment for goods before they are sent to the customer

13. Outline four reasons why governments participate in business. (4 Marks)
    
    1. ...…………………………………………………………………………………………………..……
    2. ……………………………………………………………………………………………….…..….…
    3. …………………………………………………………………………………………………………
    4. ………………………………………………………………………………………………………
14. State four features of an oligopolistic type of Market. (4 Marks)
    
    1. ..…………………………………………………………………………………………………………
    2. ……………………………………………………………………………………………….…..….…
    3. …………………………………………………………………………………………………………
    4. ………………………………………………………………………………………………………
15. The following information relates to Blue star traders in the year 2009.
    Jan 1 started business by depositing Shs. 150, 000 in the business’ bank account
    Jan 2 bought stock worth shs. 10,000 by cash.
    Enter these transactions in the relevant ledger accounts.
16. State four possible errors that may not be detected by a trial balance.
    ...…………………………………………………………………………………………………………………………………………………………………………………………………………………………
    ………………………………………………………………………………………………………………………………………………………………………………………………………………………
17. Under what four circumstances would a producer opt to sell his goods directly to his customers? (4 Marks)
    
    1. ..…………………………………………………………………………………………………..……
    2. ……………………………………………………………………………………………….…..….…
    3. …………………………………………………………………………………………………………
    4. …………………………………………………………………………………………………………
18. The balances below were extracted from the books of Kazu traders as at 30th June 2010.
    

    ITEM	KSHS
    Furniture	20,000
    Debtors	30,000
    Creditors	42,000
    Cash in hand	25,000
    Cash at bank	60,000
    Delivery van	280,000
    Capital	348,000
    Bank van	120,000
    Net loss	45,000

    Prepare Kazu’s balance sheet as at 30th June 2010.
19. State four gaps in the market that may provide an opportunity to an entrepreneur. (4 Marks)
    1. ..…………………………………………………………………………………………………………
    2. ……………………………………………………………………………………………….…..….…
    3. …………………………………………………………………………………………………………
    4. ………………………………………………………………………………………………………
20. State four reasons why an insured may not be compensated despite an insured risk occurring. (4 Marks)
    
    1. ..…………………………………………………………………………………………………………
    2. ……………………………………………………………………………………………….…..….…
    3. ………………………………………………………………………………………………………
    4. ………………………………………………………………………………………………………
21. Under what four circumstances would an office manager think of replacing an existing machine with a modem one? (4 Marks)
    
    1. ..…………………………………………………………………………………………………………
    2. ……………………………………………………………………………………………….…..….…
       ………………………………………………………………………………………………………
    3. …………………………………………………………………………………………………………
22. State four ways through which a consumer may be exploited. (4 Marks)
    
    1. ..…………………………………………………………………………………………………..……
    2. ……………………………………………………………………………………………….…..….…
    3. …………………………………………………………………………………………………………
    4. …………………………………………………………………………………………………………
23. Give four differences between an ordinary share and a preference share.
    

    ORDINARY SHARE	PREFERENCE SHARE
    …………………………………………….. …………………………………….……… …………………………………………… ……………………………………………	…………………………………………….. ……………………………….…………… …………………………….……………… ………………………….………………

24. Kim insured his motor vehicle value at shs.1,000,000 for shs. 800,000. The motor vehicle was involved in an accident and declared a write off. Calculate the amount Kim should get from the insurer. (4 Marks )
25. State four ways through which the piece of a commodity may be determined. (4 Marks)
    1. ..……………………………………………………………………………………………..…….……
    2. ……………………………………………………………………………………………….…..….…
    3. …………………………………………………………………………………………………………
    4. …………………………………………………………………………………………………………

MARKING SCHEME

1. Factors that you would consider before extending credit facilities to a customer.
   • Frequency of buying.
   • Availability of stock.
   • Credit worthiness.
   • Type of goods needed. Any other relevant @ 1 x 1 Mark = 4 Marks
2. Characteristics of human wants.
   • Insatiable.
   • Competitive.
   • Some are universal.
   • Complimentary.
   • Habitual. Any other relevant @ 1 x 1 Mark = 4 Marks
3. The figures represented by a, b, c, and d
   1. shs. 200,000.
   2. shs 400,000.
   3. shs. 350,000.
   4. shs 420,000. Any other relevant @ 1 x 1 Mark = 4 Marks
4. Principles that govern the operations of co-operative societies in Kenya.
   • Voluntary membership.
   • Democratic administration.
   • Education for members.
   • Limited interest on share capital.
   • Dividend to members. Any correct 4 @ 1 Mark = 4 Marks
5. Limitations posed by the use of national income statistics as a way of comparing the living standards of people for different countries.
   • Use of different currencies
   • Varied preferences and tastes
   • Varied distribution.
   • Inaccurate statistics Any 4 correct points x 1 = 4 Marks
6. Merits associated with internal borrowing.
   • No strings attached.
   • Can also solve inflation problems.
   • Maintains sovereignty.
   • Is flexible. Any 4 correct points x 1 = 4 Marks
7. Measures you would advice the government of Kenya to apply so as to curb the inflationary tendencies the country is currently experiencing.
   • Open Market operations.
   • Selective credit control.
   • Moral suasion.
   • Raising lending rates.
   • Waive duty on affected items. Any 4 relevant points 4 x 1 = 4 Marks
8. Factors that may influence the price elasticity of demand of a commodity.
   • Availability of close substitutes.
   • Durability.
   • Degree of necessity.
   • Proportion of one’s income spend on the commodity.
   • Time taken to adjust. Any 4 relevant points x1 = 4 Marks
9. Factors that may contribute to a case of an abnormal demand curve.
   • Incase of giffen goods.
   • Ostentatious goods.
   • Incase of inferior goods.
   • Incase of future expectations of a further price increase. Any four relevant points1 x4 = 4 Marks
10. Determine Kimeu’s capital as at 31st Dec 2010
    Closing capital = opening capital + investment + profit – drawing
    = 100,000 + 25,000 + 40, 000 – 45, 000
    = 165, 000 – 45, 000
    = 120, 000
    Note: correct answer only 4 Marks
11. Features of labour as a factor of production
    • Mobility.
    • Can’t be separated from the labourer.
    • Human i.e. it’s human.
    • Can be improved.
    • A basic factor of production.
12. Some documents used in home trade.
    1. Debit Note
    2. Letter of inquiry
    3. Advice note
    4. Profoma invoice 1 x 4 = 4marks
13. Reasons why governments participate in business.
    • Provide essential goods / services.
    • Generate revenue.
    • Protect consumers against exploitation.
    • Invest in ventures needing large capital outlay. Any relevant points @ 1 Mark 4 x 1 = 4 Marks
14. Four features of an oligopolistic type of Market
    • Few firms.
    • Interdependence of firms.
    • Experiences a kinked demand curve.
    • Firm are relatively large. Any four correct points @ 1 Mark x 4 = 4 Marks
15. Entering transactions in the relevant ledger accounts.
       
16. Possible errors that may not be detected by a trial balance.
    • Compensating error.
    • Complete error.
    • Error of principle.
    • Error of original entry.
    • Error of commission. Any correct four @1 Mark = 4 Marks
17. Circumstances under which a producer would opt to sell his goods directly to hiscustomers.
    • If perishable.
    • If technical in nature needing demonstration.
    • If the market is small.
    • If the market is concentrated in one area. Any correct point @ 1 Mark x 4 = 4 Marks
18. Balance sheet of Kazu Traders as at 30th June 2010
    KAZU TRADERS
    

    BALANCE SHEET √ 1 mk AS AT 30TH JUNE 2010
    ASSETS	SHS	CAPITAL & LIABILITIES	SHS
    Furniture    Debtors   Cash in hand    Delivery van   Stock   Cash at bank	20, 000 √ 1 mk 30, 000 √ 1 mk 25, 000 √ 1 mk 280, 000 √ 1 mk 50, 000 √ 1 mk 60, 000 √ 1 mk 465, 000	Capital Less loss Net loss Liabilities Creditors  Bank loan	348, 000 √ 1 mk 45, 000 √ 1 mk 303, 000 √ 1 mk 42, 000 √ 1 mk 120, 000 √ 1 mk 465, 000

    Total ticks 12/3 = 4 Marks
19. Groups in the Market that may provide an opportunity to an entrepreneur.
    • Insufficient / few products.
    • High prices.
    • Poor quality goods.
    • Untapped market. Any four correct point @ 1 Mark x 4 = 4 marks
20. Reasons why an insured may not be compensated despite an insured riskoccurring.
    • Wrong claiming procedure.
    • Cause of the risk was deliberate.
    • Late / delayed reporting.
    • Insurer had no funds / bankrupt.
    • Had lied. Any 4 correct points @ 1 Mark x 4 = 4 Marks
21. Circumstances under which an office manager would think of replacing an existingmachine with a modern one.
    • To improve efficiency.
    • Reduce production costs.
    • Counter competitions from other firms.
    • To improve on the quality of goods. Any four correct points @ 1 Mark x4 = 4 Marks
      Note: answer should start with if or when
22. Ways through which a consumer may be exploited.
    • Through high pricing / prices
    • Underweight goods
    • Expired goods.
    • Stock hoarding
    • Less measurement etc Any four correct points @ 1 Mark x 4 = 4 Marks
23. Give four differences between an ordinary share and a preference share
    

    ORDINARY SHARE	PREFERENCE SHARE
    Paid dividend after preference shares Have voting rights Are not cumulative in nature Possers own the company	Paid dividends before ordinary share No voting rights May be cumulative nature Possers are not owners of the co

    Any four good differences @ 1Mark x 4 = 4 Marks
24. The amount Kim should get from the insurer.
    Compensation =  sum assured x loss  
                                Actual value
    = 800,000 x 800,000
          Sh. 1,000, 000
    = Sh. 640, 000 Correct answer only 4 Marks
25. Ways through which the piece of a commodity may be determined.
    • Auctioneering
    • Haggling
    • Price mechanism
    • Tendering
    • Price controls Any correct four @ 1 Mark x 4 = 4 Marks